A mortgage loan modification could be the solution you need to lower your monthly payments so you can afford to stay in your home and avoid foreclosure. The federal government has a streamlined program that is funded by the stimulus plan, and is designed to offer loan workouts to almost 5 million homeowners. This loan workout plan is called HAMP-and President Obama is encouraging all borrowers to contact their lender to apply. How do you know if you might be eligible for a loan modification with your lender? Here is some helpful information and tips on how to apply and qualify for a loan workout.
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Why lenders offer a mortgage loan modification:
First, you need to understand that lenders are not obligated to offer a mortgage loan modification. Basically, they will offer this option if it is in their best interest to do so. Meaning that you bank will take whatever action costs them the least amount of money. Because of the sharp decline in home values, many times it is cheaper for the bank to modify the loan terms of qualified homeowners instead of foreclosing on the home. If you can convince your lender it is in their best interest to keep you in the home, you have a very good chance at getting a loan modification. But, just how do you do that?
How to apply for a mortgage loan modification:
When you apply for a mortgage loan modification you will be asked to complete some application forms. The information you provide on these forms is critical to whether you get approved or not. If you show the lender plainly, in black and white, that you are qualified and that you will be able to afford and maintain the new modified payment, you have a good chance of success. Your lender will look at your ability to pay, and they will also consider your homes current market value as opposed to the loan balance. If you owe close to or more than your homes value, your lender will probably save more money by keeping you in the home under modified loan terms.
You will have to submit:
Financial statement Hardship Letter/Affidavit Proof of income and assets
The meat and potatoes of your loan workout application is your financial statement. This is a breakdown of your monthly household income and expenses. Based on this information your lender will be able to decide if you meet the qualifications for approval. It is critical to prepare your budget ahead of time so that you have the best chance of success. There is an easy to use software program that mimics the federal guidelines-simply input your own information and it will do all the calculations for you. That way you know where you may need to make adjustments-before submitting your application to your bank.
How to qualify for a mortgage loan modification:
Successful mortgage loan modification candidates will be able to prepare and submit a complete and accurate application package to their lender. This means that all of your forms are completed correctly and meet your banks guidelines for approval. You have included all of the documentation the lender needs to see the first time so that your file will move through the system quickly. Incomplete files will be set aside and not worked on- and the answer you need will be delayed. Do you know how to prepare your forms so that you have the best chance of approval? Do you know all of the documents you should send to your lender to avoid delays? It's not hard to learn what you need to know. Make sure you are prepared before you contact your bank.
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